The relationship between consumer spending and income is known as the
A) rate of income.
B) consumption function.
C) inflation rate.
D) rate of individual wealth.

Question

Quizplus · Accepted Answer

The relationship between consumer spending and income is called the consumption function. It is a mathematical formula that relates consumer spending (C) to disposable income (Yd), usually written as C = a + bYd, where a is the intercept and b is the slope. This formula shows that as income increases, so does consumption, but there is a diminishing marginal propensity to consume.

The Relationship Between Consumer Spending and Income Is Known as the